SEC determined that CoinAlpha fund amounted to selling securities without filing a registration or qualifying for exemption.

The principles of cryptocurrency fund manager CoinAlpha Advisors LLC have agreed to settle charges brought by the US Securities and Exchange Commission (SEC), which found that their conduct was that of unregistered broker-dealers.

California-based CoinAlpha had been operating two crypto asset funds, one called CoinAlpha Falcon that runs a machine-learning strategy, and the other, CoinAlpha Index, was a market-cap weighted crypto index fund.

As explained in the order, the SEC determined that CoinAlpha fund amounted to selling securities without filing a registration or qualifying for a registration exemption, though it submitted document for exempt offering of securities law.

A communiqué on the matter issued by the commission said that CoinAlpha and its owners agreed to pay $50,000 to settle charges. They also agreed to halt the offering, review the website and marketing materials, and pay back all fees it had already collected.

The company raised over $600,000 from 22 investors, residing in at least five U.S. states to finance its fund that was meant to invest in digital assets.

“Through this offering, the investors purchased limited partnership interests in the Fund in exchange for a pro rata share of any profits derived from the Fund’s investment in digital assets,” the SEC states.

The SEC claims that the offering ran afoul of securities laws because the vehicle being offered could be considered securities, and thus the principles should have registered with the SEC as broker-dealers.